Home » Blog » Household Debt and Credit Card Delinquencies Are Low, But Many Still Stacked With Plastic

Household Debt and Credit Card Delinquencies Are Low, But Many Still Stacked With Plastic

Consumers are continuing to pay down their credit card debts although there are still many people who are stuck in the cycle of minimum payments and late fees; running revolving balances and coming up short at the end of the month. The latest figures from the Federal Reserve show that household debt levels are steadily going down while delinquency rates are the lowest they’ve been since the start of the recession. A chief economist at Moody’s analytics stated that credit card debt is going to go “from being a significant headwind on the economy, to a tailwind” as the larger effects of paying down household debt affect the economy. Additionally, the recovering housing industry and action by the Federal Reserve has contributed to extremely low mortgage rates and refinances, which consumers are using to save money in the budget overall which can also be used to pay down credit card debt.

One of the reasons often given for the low rate of credit card delinquencies is the amount of new originations offsetting those who are becoming delinquent; so credit card companies are attempting to take advantage of the gradually improving economy and trying to swell the ranks of their cardholders once again. This ensures that some people will inevitably run into hardships that cause them to fall behind their credit card debt, but credit card companies are not able to employ some of the more controversial tactics they use to gain customers and raise rates before the Card Act of 2009 was implemented. There’ve been many attempts to make up for the lost fees that are now illegal; by charging new ones and charging more to have checking and savings accounts.
While many people are able to pay down some of their household debt, it hasn’t been the light at the end of the tunnel that many hope for. Those who had high debt balances going into the Recession and lost their job, their 401(k), savings, and/or home equity are among those who are still struggling with credit card debt today. Large balances of credit card debt don’t go down by themselves. Incrementally paying down debt with a minimum payment is not the way to get out of debt.
There are several strategies for dealing with debt which depend on the consumer’s individual circumstances, how late the debts are, the consumer’s goals, the amount of liquid assets the consumer has to use in negotiations, and the specific type of the debt. The path to successfully getting out of debt was once described by an industry professional as doing some things right, but also not doing a lot of other things wrong. There are certain steps and precautions that certified financial professionals and consumer finance attorneys use when dealing with unscrupulous debt collectors or the original creditors for the accounts that minimize the chances of negative consequences. Debt relief can be accomplished more thoroughly this way.

Debt collectors have been known to try to pull payments from debit card numbers they have on file for multiple thousands of dollars without obtaining prior authorization, if that client has a delinquent account that is being handled by the collector; just one of the ways to get in a tight spot when getting out from under credit card debt. One of the golden rules in successfully getting out of debt is to never give your personal checking account number or debit account number to a third-party debt collector. We have seen just too many cases when the client gets their savings cleaned out, even though they had a different agreement with the collector to only take payments or take a smaller amount. This is only the beginning step of the narrow path of successfully dealing with bill collectors and creditors, and it is something best handled by industry professionals and consumer finance attorneys who have certification and experience in the industry and the legal power to hold collectors accountable.